According to CoinDesk, Solana's SOL tokens have experienced a 15% increase in the past two weeks, making them one of the best-performing major tokens. Data reveals that levered bullish bets account for a significant portion of futures open interest for SOL, potentially leading to a long squeeze event. Futures bets on Solana's SOL have reached a lifetime high of $1.7 billion in the past week, driven by bullish investors. Notional open interest, or the dollar value locked in unsettled futures contracts, has increased by over $700 million since the beginning of February to $1.7 billion, with $400 million added since February 8. This surpasses the previous record of $1.4 billion set in late December during a meme coin-led frenzy.
Data from tracking service Coinalyze indicates that more than 63% of positions are long or betting on higher prices, suggesting over $1 billion in bullish futures bets. Rising open interest signifies new or additional money entering the market during the price rally. However, leverage can be a double-edged sword, as it amplifies both profits and losses and can introduce volatility into the market. High amounts of leverage can often result in sudden and rapid price movements for tokens, as a price increase or decrease may trigger a liquidation event. The current bias towards long positions creates the potential for a long squeeze, where investors holding long positions may feel compelled to sell into a falling market to minimize their losses, causing a liquidation cascade. A similar build-up in late December peaked at $1.37 billion, followed by a drop from $120 to $83, or 30%, at the time. Despite this, SOL's open interest of $1.7 billion still represents less than 5% of its market capitalization of $50.55 billion, suggesting that volatility in futures may not have a lasting impact on the spot price.
